<PAGE>

                                                                   Exhibit 10.56

                              SETTLEMENT AGREEMENT
                              --------------------


         This agreement (the "Agreement") is entered into, effective May 10,
2004, (the "Effective Date") between Meade Instruments Corp. ("Meade"), on the
one hand, and Celestron Acquisition, LLC ("Celestron") and James Feltman
("Feltman"), on the other.

                                   BACKGROUND
                                   ----------

A. As used in this Agreement, the "Parties" are any and all of Meade, Celestron
and Feltman.

B. Several lawsuits (collectively, the "Litigation") are presently pending
between one or more of the Parties in the United States District Court for the
Central District of California, including:

         1.       Case No. SACV 01-976 GLT (MLGx)(the "976 Case"), in which
                  Meade has sued Celestron International Inc. and Tasco Sales
                  Inc., and Tasco Worldwide, alleging infringement of U.S.
                  Patent No. 6,304,376 (the "'376 Patent"), false and misleading
                  representations in violation of the Lanham Act, unfair
                  competition, and unlawful business practices. Celestron has
                  denied liability and asserted defenses including
                  noninfringement and invalidity in this case and has
                  counterclaimed alleging infringement by Meade of Celestron's
                  U.S. Design Patent No. D438,221 (the "'221 Patent").

         2.       Case No. SACV 02-544 GLT (MLGx)(the "544 Case"), in which
                  Meade has sued Celestron International Inc. and Tasco Sales
                  Inc., Tasco Worldwide, and James S. Feltman, alleging
                  infringement of U.S. Patent No. 6,392,799 (the "'799 Patent").
                  Celestron has denied liability and asserted defenses including
                  noninfringement and invalidity in this case and has
                  counterclaimed alleging infringement by Meade of Celestron's
                  U.S. Design Patent No. D454,899 (the "'899 Patent").

         3.       Case No. SACV 02-558 GLT (MLGx)(the "558 Case"), in which
                  Meade has sued Celestron International Inc. and Tasco Sales
                  Inc., Tasco Worldwide, James S. Feltman, Rick Hedrick, Manishi
                  Gupta, and James Barnaby, seeking correction of inventorship
                  of U.S. Patent No. 6,369,942 (the "'942 Patent") and alleging
                  false and misleading representations in violation of the
                  Lanham Act, unfair competition, and unlawful, unfair, and
                  fraudulent business practices. Celestron has denied liability
                  and asserted various defenses in this case.

         4.       Case No. SACV 02-1097 GLT (MLGx)(the "1097 Case"), in which
                  Celestron Acquisition LLC has sued Meade, alleging
                  infringement of U.S. Patent No. 6,467,738 (the "'738 Patent").
                  Meade has denied liability and asserted defenses including
                  noninfringement, invalidity, and inequitable conduct in this
                  case.

C. The assets of Celestron International Inc. and Tasco Sales Inc., and Tasco
Worldwide have been sold by Feltman, as trustee, pursuant to assignments for
benefit of creditors. Celestron has purchased some of the assets of Celestron


                                       1
<PAGE>

International Inc. Celestron International Inc., Tasco Sales Inc., and Tasco
Worldwide have ceased operations and, consequently, have ceased participation in
the 976, 544, and 558 Cases. Celestron has appeared in those cases as a
defendant and counterclaimant.

D. As required by Court rules, the Parties have recently participated in a
settlement procedure to explore the possibility of resolving the Litigation by
an agreed compromise. On May 10, 2004, representatives of the Parties
participated in a mediation conducted by Antonio Piazza, Esq., in San Francisco,
California. At the conclusion of the mediation, the Parties, with the advice and
assistance of Mr. Piazza, agreed upon a compromise to resolve the Litigation,
which they memorialized in a handwritten agreement of that date (the
"Handwritten Agreement"). A true and correct copy of the Handwritten Agreement
is attached hereto as Exhibit "A." In the Handwritten Agreement, the Parties
agreed to sign a more formal agreement. This Agreement is that more formal
agreement.

E. As used in this Agreement, the "Subject Patents" are any and all of:

         1.       The '376 Patent and '799 Patent and any and all patents
                  Related to either of them (collectively, the "Meade Patents");

         2.       The '221 Patent, '899 Patent, and '738 Patent and any and all
                  patents Related to any of them (collectively, the "Celestron
                  Patents"); and

         3.       The '942 Patent and any and all patents Related to it
                  (collectively, the "Corrected Patents").

F. As used in this Agreement, a patent is "Related" to another patent if: (1)
the patent results from a continuation application, divisional application, or
continuation in-part application or any other type of application, claiming
priority from the other patent or its predecessor applications, or (2) the
patent is a reissue, reexamination, or extension of the patent or of any patent
resulting from any of the foregoing applications.

G. As used in this Agreement, an "Affiliate" of a given entity is any other
entity that controls, is controlled by, or is under common control with, the
given entity.

H. As used in this Agreement, "Computerized Telescope" means motorized
telescopes, telescope mounts, and telescope systems (collectively, "Telescope")
that internally or externally provide electronic data corresponding to a
Telescope position, whether defined as alt-az coordinates, RA-Dec coordinates, a
specific celestial object, or otherwise.

I. As used in this Agreement, a "License" means a non-exclusive license, for the
full remaining term of any and all of the specified patents, to make, use, have
made, sell, offer for sale, or import any and all products, methods or anything
else covered by the specified patents. As used in this Agreement, a "License"
extends not only to the Party specified as receiving such License, but also to
the Party's customers, suppliers, vendors, employees, and agents for conduct in
their capacities as such. All Licenses referred to in this Agreement are paid-up
and royalty-free except insofar as this Agreement expressly provides for
royalties.

                                       2
<PAGE>

J. As used in this Agreement, "Licensed Products" means any and all products
that include or use, with an altitude-azimuth mount or a mount functioning, or
capable of functioning, in an altitude-azimuth configuration, any
level-and-point North alignment procedure, or similar type of alignment
procedure using altitude and azimuth terrestrial reference positions (e.g.,
level-and-point South). Licensed Products include products that include "Easy
Align" (i.e., the alignment method currently or formerly used in certain Meade
products or any method that is based thereon) and "Auto-Align" (i.e., the
alignment method currently or formerly used in certain Celestron products or any
method that is based thereon), only if such Auto Align or Easy-Align alignment
methods include or use a level-and-point North alignment procedure, or similar
type of alignment procedure using altitude and azimuth terrestrial reference
positions. The parties hereby acknowledge and agree that a polar oriented
computerized German equatorial mount (as such mount is currently commonly known
in the trade and as such term is used in Celestron's current print
advertisements) shall not be considered a Licensed Product for purposes of this
Agreement.

                              TERMS AND CONDITIONS
                              --------------------

         In consideration of the mutual covenants, representations, warranties
and agreements and the conditions set forth in this Agreement, the Parties agree
as follows:

1.       LICENSES
         --------

         1.1 Celestron shall pay Meade royalties (the "Royalties") as follows:

                  (a) Royalties shall be equal to the greater of $100 per unit
or 8% of Celestron's net revenue from each unit , for each unit sold by
Celestron of any Licensed Product after August 15, 2004. For purposes of this
Section, "net revenue" shall mean gross sales less actual discounts, actual
rebates, actual refunds and actual returns.

                  (b) Royalty payments shall be made quarterly within thirty
(30) days after the end of each calendar quarter and shall be accompanied by a
declaration under penalty of perjury by a Celestron officer, certifying the
amount of revenues as provided in this Paragraph 1.1 and the calculation and
amount of resulting royalties.

                  (c) Royalties will continue on all Licensed Products until the
expiration of the last Meade Patent.

                  (d) Royalties shall be due only for Licensed Products.

                  (e) Notwithstanding anything contained in this Agreement to
the contrary, Celestron shall not pay any Royalties on the sale of any products,
whether or not such products are Licensed Products, sold and shipped by
Celestron to Costco Wholesale Corporation ("Costco") prior to or on November 30,
2004 to the extent Celestron does not sell in excess of 45,000 units of Licensed
Products in the aggregate. Celestron shall pay Royalties on any sales of
Licensed Products to Costco (i) in amounts in excess of 45,000 units in the
aggregate, regardless of whether such sales occurred prior to or after November
30, 2004, or (ii) following November 30, 2004.

                                       3
<PAGE>

         1.2 Subject to and during Celestron's compliance with the terms and
conditions of this Agreement, Meade grants Celestron a License under the Meade
Patents and the Corrected Patents.

         1.3 Meade shall have the right at its cost upon reasonable notice and
not to exceed once per year, to have an independent accounting firm inspect,
copy and audit Celestron's books and records concerning royalties under this
Agreement. Meade agrees that it shall use the results of any such audit solely
for the purpose of enforcing its rights under this Agreement and for no other
purpose, and shall otherwise ensure the confidentiality of any audit, the
results of the audit and any copies, extracts or analyses made therefrom.

         1.4 Concurrent with the execution of this Agreement, Meade shall
deliver to Celestron signed memoranda memorializing the License set forth in
Paragraph 1.2 in a form suitable for recordation with the U.S. Patent and
Trademark Office.

         1.5 The License set forth in Paragraph 1.2 shall not be assigned,
sublicensed or transferred, except upon the sale of substantially all of
Celestron's assets or the sale or merger of Celestron, without Meade's written
consent.

         1.6 Celestron agrees that the Meade Patents are valid and enforceable
and cover the Licensed Products, and Celestron agrees not to challenge the
foregoing in any case or proceeding relating to any product whatsoever. The
Parties shall issue a joint announcement that Celestron agrees to the validity
of Meade's Patents and Meade agrees to the validity of Celestron's Patents.

         1.7 Celestron agrees to mark its Licensed Products with the numbers of
the Meade Patents as soon as practical after receipt of written notice from
Meade identifying such patents.

         1.8 Celestron grants Meade a License under the Celestron Patents.
Concurrent with the execution of this Agreement, Celestron shall deliver to
Meade signed memoranda memorializing such License in a form suitable for
recordation with the U.S. Patent and Trademark Office.

2.       MUTUAL RELEASES AND COVENANT NOT TO SUE
         ---------------------------------------

         2.1 As used in this Section 2:

                  (a) "Claims" means any and all claims, demands, causes of
action, suits, choses in action, controversies, actions, judgments, liens,
indebtednesses, damages, losses, and liabilities of whatever kind and character,
whether known or unknown, asserted or unasserted, whether or not stated in the
Litigation, relating to or arising out of any matter whatsoever before the
Effective Date, from the beginning of the world. "Claims" does not include any
rights created or obligations imposed by this Agreement. "Claims" also does not
include any claims, demands, causes of action, suits, choses in action,
controversies, actions, judgments, liens, indebtednesses, damages, losses, or
liabilities to the extent they are based on events arising after the Effective
Date.

                  (b) "Release" means to forever completely discharge, release,
waive, set over, and relinquish the Claims.

                                       4
<PAGE>

                  (c) "Releasee" means a Party (and "Releasees" means Parties)
against whom a Party or Parties Release claims. A Releasee includes not only the
entity, but also the entity's directors, officers, shareholders, owners,
partners, managers, members, parents, subsidiaries, predecessors, successors,
executors, administrators, assigns, agents, employees, attorneys and
representatives.

                  (d) "Releasor" means a Party (and "Releasors" means Parties)
who Release(s) claims against another Party or Parties. A Releasor includes not
only the entity, but also the entity's directors, officers, shareholders,
owners, partners, managers, members, parents, subsidiaries, predecessors,
successors, executors, administrators, assigns, agents, employees, attorneys and
representatives. Where two or more Releasors are identified in connection with a
particular Release, the Release shall extend to and include Claims which are
joint, several, or joint and several as concerns the Releasors.

         2.2 Meade, as Releasor, agrees to and does hereby Release the Claims
against Celestron, James Feltman, Alan Hale, Joseph Lupica, Rick Hedrick,
Manishi Gupta and James Barnaby and their customers, suppliers and vendors in
their capacity as such.

         2.3 Celestron and James Feltman, as Releasors, agree to and do hereby
Release the Claims against Meade and its customers, suppliers and vendors in
their capacity as such.

         2.4 It is the intention of each Releasor in executing this Agreement
that the same shall be effective as a bar to each and every Claim and in
furtherance of this intention, each Releasor does hereby expressly waive and
relinquish the provisions, rights and benefits of Section 1542 of the California
Civil Code. Each Releasor warrants that it is familiar with and has been advised
of the provisions of California Civil Code Section 1542, which provides as
follows:

                  "A general release does not extend to claims which the
                  creditor does not know or suspect to exist in his favor at the
                  time of executing the release, which if known by him must have
                  materially affected his settlement with the debtor."

         2.5 Concurrent with the execution of this Agreement, Celestron shall
deliver to Meade releases signed by Alan Hale, Joseph Lupica, Rick Hedrick,
Manishi Gupta and James Barnaby, in the form attached as Exhibit "B" to this
Agreement, in which Alan Hale, Joseph Lupica, Rick Hedrick, Manishi Gupta and
James Barnaby, as Releasors, Release the Claims against Meade and its customers,
suppliers and vendors in their capacity as such.

         2.6 Meade agrees not to assert any existing or future patents against
any existing Celestron non-Computerized Telescope that is available on the
market as of the date hereof. Celestron agrees not to assert any existing or
future patents against any existing Meade non-Computerized Telescope that is
available on the market as of the date hereof.

3.       '942 PATENT
         -----------

         3.1 Celestron hereby represents and warrants to Meade that Celestron
owns all right, title and interest in the `942 Patent and that it has succeeded
to all rights formerly held by the inventors of the `942 Patent. Celestron
hereby stipulates to correction of inventorship of the '942 Patent as sought by
Meade in the 558 Case and, concurrent with the execution of this Agreement,


                                       5
<PAGE>

delivers to Meade a signed stipulation, in the form attached as Exhibit "C" to
this Agreement, for entry of judgment accordingly, with each party to bear its
own attorneys' fees and costs from the 558 Case.

         3.2 Celestron shall assign and transfer the '942 Patent to Meade.
Concurrent with the execution of this Agreement, Celestron delivers to Meade an
executed assignment suitable for recordation with the U.S. Patent and Trademark
Office in the form attached as Exhibit "D" to this Agreement.

4. DISMISSAL OF LITIGATION The Parties shall promptly sign and file with the
Court stipulations in the form attached as Exhibit "E" to this Agreement,
providing for the dismissal with prejudice of the 976, 554, and 1097 Cases, as
well as the appeal to the U.S. Court of Appeals for the Federal Circuit of the
976 Case, with each party to bear its own attorneys' fees and costs from the
cases, and requesting that Judge Gary Taylor of the United States District Court
for the Central District of California, Southern Division, Santa Ana, retain
jurisdiction to enforce and interpret the Settlement and this Agreement. In the
event Judge Taylor is no longer a sitting active federal judge, then another
federal judge sitting in the United States District Court for the Central
District of California, Southern Division, Santa Ana, shall enforce and
interpret the Settlement and this Agreement. The dismissals shall be effective
regardless of whether the Court retains such jurisdiction. Celestron and
Feltman, severally and not jointly, represent and warrant that they have full
authority to settle and dismiss all counterclaims and defenses asserted by
Celestron International Inc., Tasco Sales Inc., and Tasco Worldwide in the
Litigation.

5. JOINT ANNOUNCEMENT The Parties will issue a mutually acceptable joint public
announcement that the Parties have settled the Litigation, that Celestron agrees
to the validity of the Meade Patents, and that Meade agrees to the validity of
the Celestron Patents.

6. BINDING This Agreement is binding on any and all Affiliates, successors, and
assigns of the respective Parties.

7. NOTICES Any notice required or permitted to be given hereunder shall be given
by overnight mail and e-mail, unless required to be given in some different
fashion by the terms of this Agreement. Notice shall be deemed to have been
given upon actual receipt of the notice. Notice shall be given as follows:

IF TO MEADE:                               IF TO CELESTRON:

Meade Instruments Corp.                    Celestron Acquisition, LLC
6001 Oak Canyon                            2835 Columbia Street
Irvine, CA 92618                           Torrance, California 90503
Attention: General Counsel                 Attention: President
mark.peterson@meade.com                    jlupica@celestron.com

                                       6
<PAGE>

with a copy to:                            with a copy to:

Attention: William J. O'Brien              Jeffer, Mangels, Butler & Marmaro LLP
O'Melveny & Myers LLP                      1900 Avenue of the Stars, 7th Floor
400 South Hope Street                      Los Angeles, California  90067
Los Angeles, California 90071              Attention:  Robert E. Braun, Esq.
wobrien@omm.com                            rbraun@jmbm.com


and


Turner Green Afrasiabi & Arledge LLP
535 Anton Boulevard, Suite 850
Costa Mesa, California  92626
Attention: Peter R. Afrasiabi
pafrasiabi@turnergreen.com


8. OWNERSHIP OF RIGHTS Each Party represents and warrants that it owns all
rights to all patents, technology, or other matters that it has agreed herein to
license.

9. NO ASSIGNMENT OF CLAIMS The Parties covenant that none of them has assigned
or caused to be transferred to any person or entity not a Party to this
Agreement any of the Claims or rights released by such Party in this Agreement.

10. ENTIRE AGREEMENT This Agreement expresses the Handwritten Agreement and the
Parties' entire understanding regarding its subject matter - including the
Settlement, the Litigation, and the Subject Patents, and supersedes in their
entirety any and all written or oral agreements previously existing between or
among the Parties with respect to the subject matter of this Agreement,
including, without limitation, the Handwritten Agreement. This Agreement is
final and may not be amended, modified or changed, and no waiver of any
provision of this Agreement shall be effective, except by an instrument in
writing signed by the Party(ies) against whom the amendment, modification,
change or waiver is sought to be enforced.

11. ASSUMPTION OF RISK Except as for the representations expressly stated in
this Agreement:

                  (a) In entering into this Agreement, each Party assumes the
risk of any misrepresentation, concealment or mistake;

                  (b) If any Party should later discover that any fact relied
upon by it in entering into this Agreement was untrue or that any fact was
concealed from it, or that its understanding of the facts or the law was
incorrect, the Party shall not be entitled to set aside or rescind this
Agreement, or to any other relief; and

                  (c) This Agreement is intended to be and is final and binding
upon each Party regardless of any claims of misrepresentation, contract made
without the intention to perform it, concealment of fact, mistake of fact or law
or any other circumstance whatsoever.

                                       7
<PAGE>

12. CONSULTATION WITH COUNSEL The Parties each acknowledge that they have had
the opportunity to consult with legal counsel of their choice prior to execution
of this Agreement, have in fact done so, and have been specifically advised by
counsel of the consequences of this Agreement and their respective rights and
obligations hereunder.

13. CONSTRUCTION The Parties further acknowledge that the terms of this
Agreement are the result of negotiations between them, and that this Agreement
shall not be construed in favor of, or against, any party by reason of the
extent to which a Party or its counsel participated in its drafting, or by
reason of the extent to which this Agreement may be inconsistent with prior
drafts thereof.

14. COUNTERPARTS This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument representing the agreement of the Parties to this Agreement.

15. AUTHORITY Each person signing this Agreement in a representative capacity
expressly represents that the signatory has the subject Party's authority to so
sign and that the subject Party will be bound by the signatory's execution of
this Agreement. Each Party expressly represents that such Party does not require
any third party's consent to enter into this Agreement, including, without
limitation, the consent of any spouse, insurer, assignee, licensee, secured
lender, or regulatory agency.

16. HEADINGS AND CAPTIONS Headings and captions used in this Agreement are for
ease of reference only, and do not constitute part of this Agreement, nor shall
they be used as an aid in the construction hereof.




Dated: July 1, 2004                        Meade Instruments Corp.


                                           By: /S/ STEVEN G. MURDOCK
                                              -------------------------------
                                           Name: Steven G. Murdock
                                           Its:  President, CEO and Secretary



Dated: July 1, 2004                        Celestron Acquisition, LLC


                                           By: /S/ JOSEPH LUPICA
                                              -------------------------------
                                           Name: Joseph Lupica
                                           Its: President


Dated: July __, 2004                           /S/ JAMES S. FELTMAN
                                              -------------------------------
                                               James S. Feltman


                                       8
<PAGE>


                                LIST OF EXHIBITS
                                ----------------



EXHIBIT A         Handwritten Agreement

EXHIBIT "B"       Additional Releases

EXHIBIT "C"       Stipulation

EXHIBIT "D"       Form of Assignment

EXHIBIT "E"       Form of Stipulations